Early reshuffle of brokers mean big changes ahead in 2012

(Reuters) - Just a month into the new year, and there has already been some major reshuffling among brokerages, with top financial advisers who manage more than $8 billion assets moving from one firm to another since Jan 3.

In January, at least 10 teams with an annual production of $2 million or more switched firms, based on moves tracked by Reuters.

"The movement of big teams in January is a bellwether for what we'll see this year," said Mark Elzweig, a New York-based financial services recruiter who has worked in the industry for more than two decades. "There's been a lot of movement among very large teams who control significant pools of assets."

The recruiting packages offered to advisers who bring in big money have risen sharply to historic levels, industry experts say. They expect the packages to keep going up throughout 2012.

Attrition among advisers is usually higher in the first quarter because of the way bonuses and retention loans are paid out and amortized. But this January has been marked by big moves in terms of assets under management at top U.S. brokerages such as Merrill Lynch and Morgan Stanley Smith Barney.

"Advisers often move when we're in an environment of 'moderate market misery'," Elzweig said, noting that's the environment that exists now.

He said advisers are less likely to move in times of extreme market volatility - partly because it is difficult to convince clients whose accounts are performing poorly to move with them. In times of market stability, advisers are comfortable and less likely to move.

"We're in a middle ground right now, when markets are not in crazy gyrations, which makes the perfect time for financial advisers to look around," said Tom Lewis, a New Jersey-based attorney with Stark & Stark, who has moved more than 1,500 brokers during his career. "I expect 2012 to be an active time period for the transition of financial advisers across the industry."

Among the top four U.S. brokerages, UBS Americas Wealth Management had the biggest net gain in January of more than $2.5 billion in client assets.

To calculate gains or losses, Reuters subtracted the dollar value of client assets managed by advisers who left a firm from the dollar value of client assets managed by advisers recruited to the firm.

At the other end, Bank of America's Merrill Lynch had the biggest net loss, with more than $4 billion in client assets leaving along with at least 20 advisers.

Lewis has seen recruiting packages rise to between 300 and 400 percent of a broker's annual revenue generation, with up to 200 percent up-front. For an adviser generating $2 million in annual revenue, that's about $4 million in bonus on day one. As long as the adviser stays for the agreed seven to nine years, the money is his to keep. Leave sooner and part of the money will have to be paid back.

LEGACY BROKERS LEAVE

The market environment is only one reason for the scale of the reshuffling. As legacy advisers move, their peers consider options, too, said Michael Cox, who was with Morgan Stanley for more than 15 years before moving to Wells Fargo in January.

Cox said his branch lost 10 advisers late last year, including some who had been with the firm for more than 30 years. By the time he left, his Florida office had been halved to three advisers from six.

"That really got our attention," Cox said. "After that, the three of us brokers sat down and just said we would take a look at what else was out there."

REGIONAL FIRMS

Regional firms also recruited many advisers from rivals in January.

Ameriprise Financial said it finished January with 53 hires, a more than 200 percent increase over last January..

The Minneapolis, Minnesota-based firm told Reuters earlier this month that it added four regional directors this year to help bring in new talent. The recruiters, primarily based on the East Coast, previously worked at UBS, Raymond James and Morgan Stanley.

Benjamin F. Edwards & Co, a four-year-old boutique brokerage in St. Louis, Missouri, said it had its biggest single-day hiring spree on January 12. The six advisers hired that day defected from Wells Fargo.

Raymond James and Janney Montgomery Scott also each scored a team from Wells Fargo this month, in Virginia and Massachusetts, respectively. Both teams managed at least $90 million in client assets.

(Reporting by Ashley Lau; editing by Jennifer Merritt and Andre Grenon)